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T-Mobile Q4 Earnings Results: 1.6 Million Subscribers, but $20 Million Loss

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T-Mobile released its 2013 Q4 earnings today, and they’re a bit mixed. Although the “UnCarrier” managed to add 1.6 million wireless subscribers, it posted a $20 million loss on earnings of $6.83 billion. That’s a 40 percent year-over-year increase in revenue, but a tad short of what investors expected ($6.95 billion).

The loss was mostly attributable to the T-Mobile’s marketing and many “UnCarrier” moves. It’s hard to believe the company introduced its contract-free plans, Jump! upgrade program, international data plan, and Early Termination Fee (ETA) reimbursal deal all in one year, but with a CEO as passionate and aggressive as John Legere, perhaps rapid-fire changes shouldn’t come as a surprise.

Despite the loss, T-Mobile managed to add an impressive 4.4 million subscribers by the end of fiscal 2013. That’s a record for the carrier, and a figure John Legere was clearly excited about. He said in a prepared statement, “Our performance in the fourth quarter and the full year is clearly proving that we have our strategy right and that we are executing it well. Customers are fed up with the old ways and are voting in favor of choice, innovation and doing business with a company that cares about them and is willing to earn their business.”

Here’s the press release:

T-Mobile US Reports Fourth Quarter and Full Year 2013 Results and Third Consecutive Quarter of Over One Million Net Customer Additions

Fourth Quarter 2013 Highlights:

  • Total net customer additions of more than 1.6 million
  • 981,000 total branded net customer additions with 869,000 branded postpaid net additions, representing the best branded postpaid performance since the fourth quarter of 2005
    • Improving branded postpaid phone net additions of 800,000 and 69,000 mobile broadband net additions
    • Accelerating branded prepaid customer growth with 112,000 net customer additions
  • Continued low branded postpaid churn of 1.7%, flat quarter-over-quarter and down 80 basis points year-over-year, resulting in the best quarter of year-over-year churn reduction in 2013
  • Delivered third consecutive quarter of sequential service revenue growth
  • Strong Adjusted EBITDA of $1.239 billion and Adjusted EBITDA margin of 24% combined with significant customer growth
  • Successful modernization program delivers nationwide 4G LTE network coverage to 209 million people in 273 metro areas

Full Year 2013 Highlights:

  • Total net customer additions of more than 4.4 million on a pro forma combined basis
  • 2.4 million total branded net customer additions including 2 million branded postpaid and 359,000 branded prepaid customers on a pro forma combined basis
  • Branded postpaid churn of 1.7%, down 70 basis points year-over-year
  • Adjusted EBITDA of $5.317 billion and Adjusted EBITDA margin of 26% on a pro forma combined basis
  • Successful introduction and execution of major Un-carrier initiatives
  • Rapid progress with the integration of MetroPCS by expanding the brand into 30 additional markets
    • Currently 3.5 million MetroPCS customers on the T-Mobile network
  • Met or exceeded all company guidance targets for 2013

 

Full earnings report.

  • T_Dizzle

    With the purchasing of Metro PCS and other LTE advancement it looks like T-Mobile is headed in the right direction. The thing to keep in mind is that they were still profitable.

  • CHRIS42060

    If the activation experience I had is commonplace I am amazed they got 1.6 million new customers. I can tell you that the $20 million in losses did not go to pay for customer service staff that is for sure.

  • Ryan5609

    Since the “Come to T-Mobile and we’ll pay your ETF’s” promotion started in 2014, I am much more interested to see 2014’s Q1 and Q2 numbers. This will reflect all of those Verizon and ATT defectors, like myself.

  • MistaButters

    Although we see that as a pretty small miss, Wall Street sees that as a pretty big miss.

  • Tim242

    I knew their nonsense was not sustainable.

    • Adrynalyne

      Gotta spend money to make money.

      This has long-term benefit.

  • Daistaar

    Don’t see how that’s a loss or disappointing. 1.6 million times the lowest possible plan at $30 is $48 Million dollars in one month. If all they lost was half that in a quarter then they are already breaking even (plus an 8 million profit at the very least) and should be in the green month after month. Is my math wrong here?

    • Franklin Ramsey

      Yes, your math is wrong considering it doesn’t take into account any costs to them over that month period. Let’s say they spend $50 million in that period they take $48 million in. They would be in the red still.

      • Daistaar

        Yes you’re right. However, this was a quartly loss; meaning this loss was spread out over the course of three months. Operating expenses should easily cover this, no? Even on the lowest plan, the new additions alone would equate to nearly 50 million (A MONTH), minus taxes and fees which would still bump it up.

        • Franklin Ramsey

          Well in that case you assume that costs would remain fixed for the three months. As anyone in business will tell you, even with budgets, costs never run exactly the same. They certainly wouldn’t remain the same with more users added to a network. Since they were operating on a 26% margin, you could argue that at the lowest estimate of $50 million a month they should be seeing roughly a $13 million dollar rise in profits per month, but that would assume that all costs remain the same and wouldn’t account for the ETFs they are paying out or any other increase in costs, which would mean for the next quarter they could potentially be at a $20 million profit.

  • jonzey231

    Yay!! I am .000001875% of their additions!!!

  • cwillen

    If they got 1.6M new customers, and all it cost them was $20M, that is a HUGE win for them in the long game. That means their customer acquisition costs were only $12.50/customer. Granted there are other marketing dollars in there, but that’s still a win in the long term.

    • MistaButters

      Not quite. If you assume they could make AT&T type margins (which may be a stretch), they would have made half a billion or so profit.

      Actually, just divining their operating loss by customer’s gained is a really bad way to figure out customer acquisition costs. Really bad.

  • Al-Burrit0

    Okay so they got the subscribers and the affordable data plans. Now can they start focusing in improving their cell coverage and data coverage through out the US?! I would love to JUMP! Ship but with that coverage its impossible!

    • Aaron C

      That newly-purchased low-frequency Verizon spectrum will see to that. I’m hoping to have a signal inside where I work by the end of 2014. That would be sweet.

      • Tim242

        Spectrum does not equal more towers, or upgrading their sea of EDGE.

        • Bobby

          But like he said lower frequency does help with building penetration which is the only point he was trying to make.

          • Franklin Ramsey

            But without towers pushing out that lower frequency, the fact they bought the rights to that spectrum doesn’t equate to a better signal.

        • Aaron C

          True that, but when they do finally roll out those towers (instead of piggy backing on the AT&T roaming deal), the signal will reach much farther than the 1900Mhz or 2100Mhz or whatever it is they’re using now, and building penetration will be so much better. With the amount of cash they have on hand and the number of subscribers they’re gaining, I have every confidence they will solve the coverage issue. But that’s just me.

      • Al-Burrit0

        Yea I’ve heard people complain about reception in the building, but where I live its overall bad. A lot places with low coverages. Its great in the big cities, smaller cities not so much…

  • duke69111

    A tax write off will probably take care of the 20 million loss.

  • duke69111

    One of your earnings and expectation number is messed up.

    • Kyle Wiggers

      Thanks. Fixed.

  • Mikey Styles

    This is good & bad for T-Mo. One thing is for sure they are @ least trying inventive ways to be more successful, the other 3 only are reacting to what T-Mo starts. A for effort guys.

  • calculatorwatch

    “Although the “UnCarrier” managed to add 1.6 subscribers,”

    Man they’re really hurting for good news if they’re bragging about 1 and a half people huh?

    In all seriousness though, I’m sure T-mobile doesn’t mind that they lost only $1.25 for each added customer. This will really help them in the long run.

    • Michael Johnson

      I believe it’s actually $12.50 per new customer, isn’t it?

      • calculatorwatch

        Oh yeah you’re right I misplaced a decimal in my head. Still not a bum deal on T-mobile’s part though.

        • michael arazan

          They also didn’t post how many customers left T-Mobile either, food for thought. Are their any numbers of total users on t-mobile to correlate too?

          • calculatorwatch

            The press release does say “Total net customer additions of more than 1.6 million”. Usually that means they factored in losses as well.

    • cwillen

      $12.50, not $1.25. But yea.

  • Alexander Garcia

    Well… It’s certainly a loss, for now. It’ll be well worth it in the long run, however. Gotta spend that spend that cash to make that cash. =)

  • Franklin Ramsey

    “Although the “UnCarrier” managed to add 1.6 subscribers, it posted a $20 million loss on earnings of $6.83 billion. That’s a 40 percent year-over-year increase in revenue, but short of investor’s expectations of $6.83 billion.”

    How were they short of hitting expectations of $6.83 billion in revenue if they had earnings of $6.83 billion?

    • panicswhenubered

      The first paragraph is all sorts of messed up.

      • The Narrator

        Revenueception

      • Kyle Wiggers

        Reworked. Thanks.

    • Mike Aurin

      You had one job, Kyle!

      • Kyle Wiggers

        I failed. :(

        • Bobby

          I see you took the name off the article now. No shame in pushing out articles and having to rework them. I can’t think of too many people that get it all right the first time especial when dealing with press releases and mix matched numbers.

          • Kyle Wiggers

            Took what name off the article?

          • Bobby

            The article says by __ not by Kyle.

          • Kyle Wiggers

            Hmm. That’s a bug. I’ll investigate.

          • duke69111

            It shows by Kyle on my end.

    • Ryan N

      press release states $5.317b if you were wondering.

      • Franklin Ramsey

        Yes, I noticed that. I was mostly pointing out to Kyle that he has his numbers off.

        • Ryan N

          fair enough. haha

    • Kyle Wiggers

      It’s been one of those days. Fixed.

      • Franklin Ramsey

        It happens to the best of us!

      • Ian

        “1.6 wireless subscribers” – 1.6 million wireless subscribers

  • Michigan Guy

    I think you expect that with all the money they paid in ETAs, but the subscribers addition should fix that in future quarters adding to T-mobile’s baseline of revenue.

    • Franklin Ramsey

      Actually I would bet they have the money they paid in ETFs being paid off the books over the course of 6-18 months. Sort of depreciation of a return on investment. Their books will show the amount of cash being paid out to the person, but I would warrant there are other entries to push that into another investment category on their asset sheets.

  • EdubE24

    Hey look its a picture of the the troll formally known as “John Legere”!

  • Guest

    I’d like to 1^ this for not being a samsung article. ha

  • Thomas

    OUCH :(

    • Ryan N

      keep in mind, thats a $20m loss but with subscribers they’re getting at least $50-60/month/subscriber x 1.6m x 3 months (next full quarter). They’re looking at roughly $250-300 million return in just the next quarter.

      • Franklin Ramsey

        You are forgetting that they operate at about a 30% margin, so the math would look more like $50-60/month/subscriber x 1.6M x 3 months x .3 margin. Which would mean roughly $75-90 million the next quarter. And that doesn’t take into account any other aspects to those customers, such as paying out the ETF fee to the customer which T-mobile would have on their books as being paid out over a few months to a year (depreciation).

        • Ryan N

          Yeah, I realize that 300 mil wouldn’t be net. I was talking gross. and thats in addition to the subscribers they already had on their network. My point being, they are making strides that I wouldn’t have expected out of Tmo a year or two ago.

          • Franklin Ramsey

            Ok, you just had that “return” in there and the actual gross is right, the return isn’t lol

          • Ryan N

            my b. I meant revenue. ha. fixed it.

        • Aaron C

          I heard an interview with a T-Mobile exec (don’t remember who it was) that said the ETF fees were basically covered by the reduced amount of marketing they do compared to AT&T and Verizon. They’re getting a lot of word-of-mouth marketing coverage from their uncarrier plans and announcements, and aren’t paying any more per customer acquisition than any of the other carriers.

          • Franklin Ramsey

            Well that can’t be right since their operating margin went from 34-38% the first three quarters of the year to 26% this last quarter. So either that Exec doesn’t understand accounting, finance, or budgets, or he was given incorrect information.

      • Maximus

        You’re assuming people stay that quarter…that entire 3 months. I left Sprint…twice now. I need a cell phone service more dependable than my car…in case my car has a problem. Tmo just can’t provide that yet. And seeing has they have no contracts, there’s no guarantee of the customer staying.

      • Thomas

        You people & your math ;)